Who can borrow these loans?
Parents of dependent undergraduate students
How much can I borrow?
No annual or total limit
What’s the current interest rate?
Is my parent responsible for paying the interest?
Dig Into The Details
Who Can Borrow These Loans?
Natural, adoptive, legal guardians, and stepparents (including same-sex stepparents) of dependent undergraduate students are eligible to borrow these loans. The borrower must have good credit and you (the dependent undergraduate student) must be:
- A U.S. citizens or eligible non-citizen.
- Enrolled at least half-time at an eligible institution.
If your parent is denied due to poor credit, he or she can enlist a family member or friend with good credit to co-sign. Your parent can also appeal the decision if he or she can document extenuating circumstances.
How Much Can My Parent Borrow?
There's no annual or total borrowing limit—your parent just can't borrow more than the cost of attendance at your school, minus all of the other aid you have received. Also, if your parents are denied for a Parent PLUS loan, you may qualify for addition unsubsidized Stafford loans.
You do not need to show financial need to have a Parent PLUS loan applied to your account, but you do need to complete the Free Application for Federal Student Aid (FAFSA) to apply.
What's The Current Interest Rate?
All Direct Parent PLUS loans made between July 1, 2014, and June 30, 2015, have an interest rate of 7.21%.
For Direct Parent PLUS loans made between July 1, 2010, and June 30, 2013, the interest rate is 7.9%. For Direct Parent PLUS loans made between July 1, 2013, and June 30, 2014, the interest rate is 6.41%. In addition, FFELP Parent PLUS loans made between July 1, 2006, and June 30, 2010, have an interest rate of 8.5%.
Is My Parent Responsible For Paying The Interest?
Yes. Parent PLUS loans are not subsidized, and the loan is in the parent's name. That means that your parent will be responsible for any interest that accrues over the entire lifetime of the loan.
Interest begins accruing on these loans when they are disbursed. Your parent may postpone payments with an in-school deferment while you are enrolled at least half time; however, interest will continue adding up on these loans during this time. When your parent goes into repayment, the interest capitalizes (gets added to their principal balance)—so your parent will have to pay interest on the capitalized amount as well as the initial loan balance.
Your parent can make monthly or quarterly interest payments on these loans. By doing so while you're still in school, your parent can prevent or reduce the capitalization.
Whose Loan Is It, Anyway?
Many families who use Parent PLUS loans decide that the student will take over the payments from the parent after graduation. Just remember that a Parent PLUS loan will always be in the parent's name. It can’t be transferred into anyone else's name at any point. This means that your parents will always be responsible for the payments, even if you willingly make them on their behalf.
If you fall behind on payments—or even worse, if the loan goes into default—it will damage your parent’s credit, not yours. This also means that any lower payment or postponement options will be based on your parent's circumstances, not yours—even if you are the one making the payments.
If you have such an agreement with your parent, make sure that you can afford to make these payments on time. The worst possible way to say "thank you for helping pay for my education" is by contributing to a default on your parent’s credit report.
Be Money Smart
Here's a little more info about how much your parent could save by making interest-only payments while you’re in school.
Let's say your mom or dad borrowed a $20,000 Grad PLUS loan with a 7.21% interest rate. After 2 years in school, about $2,884 worth of interest would be added to the debt, making the new balance $22,884 when it enters repayment.
If they paid that amount off using the standard 10-year, 120-payment plan, the $20,000 loan ends up costing about $32,182. But, if they pay the interest while you're in school, the total bill after 10 years would be nearly $4,000 lower!
Want to learn more about repaying Parent PLUS loans? Check out this article.